Unbundled settlement fees from other asset servicing fees was just one of the predictions made at CorpActions 2013, which offered insight to people within capital markets and the wider institutional investment industry.
Unbundled settlement fees from other asset servicing fees was just one of the predictions made at CorpActions 2013, which offered insight to people within capital markets and the wider institutional investment industry.
In the first panel, which asked how the corporate actions landscape will look in the next few years and beyond, saw one panellist announce that 2015 would be the starting point of real operational change for firms.
Regulations such as TARGET-2 Securities, the Central Securities Depository Regulation (CSDR), and the European Market Infrastructure Regulation (EMIR) will mean that corporate actions will have to be processed quicker, through different counterparties—and that this will result (hopefully) in better portability of assets.
There were various predictions made throughout the day that the current total of 42 CSDs would definitely start to drop as regulations hit. On 7 March 2012, the European Commission adopted a proposal for a regulation on improving securities settlement in the EU and on CSDs. The regulation introduces an obligation of dematerialisation for most securities, harmonised settlement periods for most transactions in such securities, settlement discipline measures and common rules for CSDs.
Given the European Commission’s attention to the systemic importance of CSDs and their strategic position at the end of the post-trading process, a new regulatory framework may mean that the smaller, more local CSDs will be left behind.
Another change in this new landscape will be around how one holds assets. The Alternative Investment Fund Managers Directive has introduced a strict liability regime, that covers cases of fraud, accounting errors, operational failure and failure to segregate assets held in custody by the depository or by a third party to whom custody has been delegated.
Segregation will thus be an important consideration for corporate actions providers, which will have to track assets much more closely.
Nat Sey, head of European product management at Interactive Data, said that the recurrent theme at the event was the industry’s need to involve the issuers—a conversation that usually plays a walk-on role in other events.
“There was an event five years ago which a representative from the registrars community attended, and what surprised me was they had no idea of the pain being felt across the rest of the processing cycle—you’d think that as an industry, we would have been able to communicate something as basic as that by now, but we haven’t. And to be honest, as an industry, I’m not sure we’ve done a very good job as of progressing things since then.”
Sey added that in the case of the issuers, there are event processing failures that may occur that should interest them—a rights issue, for example.
“If an event announcement is not as transparent as it could be, it is unlikely that the issuer will get take-up of those rights as quickly as possible. But the issuers want fast take-up of those rights—and that is just one example. If we could just get an audience with them, it would be helpful.”
Jostling for position
Another prominent topic at the event was the question of standardisation and harmonisation. Arnaud Delestienne, head of core product management at Clearstream, spoke about the T2S subgroup, which is focusing on standards for transaction management. But he stated that although T2S will allow centralised access to European markets and there can be a certain level of standardisation granted, that it would never be 100 percent.
As for adopting corporate actions standards, there was a question of whether there would be pushback from vendors, each keen to market its own proprietary solution. But Sey insisted that at its heart, corporate actions processing and provision is not competitive.
“The raw content [of processing] is available from many different vendors. What we do as a vendor is provide added value around that core: the customisation, functionality and service—all aimed at making the service as easy as possible for our customers to use. So we are perfectly happy to customise and compete on that basis but when it comes to the core standard, there is no reason to compete.”
Sey pointed to various user groups as an example of vendors working together for the betterment of the industry. One such group is the market data provider user group (MDPUG), in which vendors such as Thomson Reuters and SIX Financial sit down to establish a way forward for the industry as it relates to the use of the ISO standards.
Daniel Byrne, co-chair of the group, said that it meets to form a view on what a data vendor can do with particular events, and how they should be interpreted.
“This year with standards, there are finally labels that have been introduced to cover income unit trusts and OICs in the UK around quite specific payment types. At an industry level for our client base these are real pain points, so we would form views on how a vendor can do that, and then publish a principles document that outlines the perspective of data vendors in terms of what data we are able to deliver.”
Ultimately, it was agreed by all attending that data standards would be essential in the corporate actions space. As to whether there would be a rush to ISO 20022, a continued adoption of 15022, or choosing another standard altogether, remains to be seen.
